NEW YORK (TheStreet) -- DragonWave, Inc. (DRWI) shares continue their climb on Monday, up 6.7% to $2.06 on heavy volume, resuming the gains it experienced on Friday after the company's price target was upped to $3 from $1 by analysts at CIBC.
The broadband wireless psuedowire developer has already eclipsed its three-month daily average volume of 288,000 shares, moving 2.1 million shares so far today
The stock closed trading Friday up 14.5% following the upgrade.
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TheStreet Ratings team rates DRAGONWAVE INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate DRAGONWAVE INC (DRWI) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for DRAGONWAVE INC is currently extremely low, coming in at 14.50%. Regardless of DRWI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, DRWI's net profit margin of -64.95% significantly underperformed when compared to the industry average.
- DRWI's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 35.72%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Communications Equipment industry and the overall market, DRAGONWAVE INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The revenue fell significantly faster than the industry average of 2.6%. Since the same quarter one year prior, revenues fell by 36.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.40, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.11 is sturdy.
- You can view the full analysis from the report here: DRWI Ratings Report